- The IRS released proposed guidance for dealers and sellers of clean vehicles.
- Beginning in 2024, registration through the IRS Energy Credits Online Portal is required to submit seller’s reports and to receive advance payments of the buyer’s tax credit.
- Online registration will be available before December 31, 2023.
The IRS recently released Rev. Proc. 2023-33, providing proposed administrative and procedural guidance for qualified manufacturers and sellers of new and pre-owned clean vehicles. The public comment period for the proposed guidance ends December 11, 2023.
IRS Rev. Proc. 2022-44 provided new reporting requirements for clean vehicle sellers. The reporting requirements began January 2023 for dealers and sellers of new and pre-owned clean vehicles and included:
- A seller’s report must be provided to clean vehicle buyers at the time of sale.
- All 2023 seller’s reports must be compiled and submitted to the IRS before January 15, 2024.
Beginning January 1, 2024, all seller’s reports are required to be submitted electronically through the new Energy Credits Online Portal. Dealerships will need to register prior to submitting reports online.
The new guidance also provides that sellers must furnish new and pre-owned clean vehicle buyers with a copy of the online submission confirmation at the time of sale. Basic information about the dealership is required to register for an account.
Direct Credit Transfer
The IRA allows the New and Pre-Owned Clean Vehicle Credit to be transferred directly from the buyer to the seller. Beginning January 1, 2024, buyers will be able to transfer the full credit to dealers at the time of sale for cash or a reduction of the vehicle’s purchase price. This will provide buyers with the immediate benefit of the credit without waiting to file their tax return. Additional dealer registration is required to be eligible for participation in the direct transfer program, including federal income and employment tax compliance.
Here are the key components of the direct credit transfer program.
Buyer eligibility for the credit
- Buyers may choose to claim the credit on their tax return. Transfer is not required.
- Once the transfer has been completed, the election is final.
- Buyers must disclose specific information and attest they meet applicable credit requirements at the time of sale.
- If the buyer’s income exceeds the credit’s modified adjusted gross income limitation, the credit will be repaid on the buyer’s tax return, not to the dealer/seller.
- The amount of the credit transferred may exceed the buyer’s tax liability. The excess is not subject to repayment on the buyer’s tax return.
- Buyers may transfer no more than two clean vehicle credits each tax year, and only one of the two may be for a pre-owned clean vehicle credit.
- The credit transfer can only be made on vehicles predominantly used for personal use, not business use.
Dealer/seller eligibility for direct transfer
- Credit transfer deposits are expected to be completed within 48 to 72 hours after the payment request is submitted.
- Separate registration is required to participate in the advance payment program.
- The advance payment is treated as repaid by the buyer to the dealership as part of the purchase price of the vehicle, and therefore is treated as included in the total amount received from the sale transaction.
Next Steps for Dealerships
Dealerships selling new and pre-owned clean vehicles to buyers interested in claiming the credit must register when the portal becomes available. Registration is required for dealers and sellers to complete 2023 annual reporting and to receive advanced payments in 2024. For additional information, review the Clean Vehicle Fact Sheet, which is updated as new procedures and guidance become available.